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By Michael Georgy

MOSUL, Iraq (Reuters) - Iraqi special forces said they recaptured six districts of eastern Mosul on Friday, expanding the army's foothold in the Islamic State bastion a day after its leader told his jihadist followers there could be no retreat.

An officer in the elite Counter Terrorism Service, which has spearheaded the Mosul offensive, said troops had launched a major operation against the militants who are now almost surrounded in their last major urban redoubt in Iraq.

CTS special forces took over Malayeen, Samah, Khadra, Karkukli, Quds and Karama districts, the army said.

"This is something very big - it means large parts of the left bank have been liberated," CTS commander Lieutenant-General Talib Shaghati said, referring to the half of Mosul which lies on the east bank of the Tigris.

However, a resident of one district which the army declared recaptured told Reuters after the announcement that clashes continued.

"It's true urban warfare," he said by telephone. "My children haven't slept for two days... Bullets and shells are coming from everywhere."

In the neighborhood of Intisar, still fiercely contested by the army and jihadists, a Reuters correspondent heard heavy gunfire and explosions. Black smoke rose from an area nearby and damaged buildings showed signs of combat.

The territory taken by the government still amounts to just a fraction of the sprawling city, which is divided into dozens of residential and industrial districts and was home to 2 million people before it was captured by Islamic State in 2014.

The battle to drive the fighters out is the biggest ground operation in Iraq since the U.S. invasion in 2003, and is likely to decide the fate of the self-proclaimed Islamic State caliphate that has defied the world for two years.

The advances took the troops 1 mile (1 1/2 km) inside the city. Districts captured so far, however, are less built-up than other areas, particularly those on the west bank of the Tigris, where the population is more exclusively Sunni Muslim Arab and the hardline Sunni Islamists could be more deeply embedded.

Iraqi officers and those from a U.S.-led coalition providing air and ground support to the offensive say progress has been faster than expected but stress that the operation is still in its early stages.

SPECIAL FORCES

Iraqi regular troops and special forces, Shi'ite militias, Kurdish peshmerga fighters and other groups backed by U.S.-led air strikes launched their campaign to retake Mosul nearly three weeks ago.

Winning back the city would crush the Iraqi half of a cross-border caliphate declared by Islamic State leader Abu Bakr al-Baghdadi from a Mosul mosque two years ago.

Islamic State also holds large parts of neighboring Syria, but Mosul is by far the largest city under control of the ultra-hardline militants in either country, many times bigger than any other city the militants have held.

In a speech released on Thursday Baghdadi said there could be no retreat in a "total war" against the forces arrayed against Islamic State, telling fighters they must remain loyal to their commanders.

Baghdadi's whereabouts are unknown. British Foreign Secretary Boris Johnson said intelligence suggested he had "vacated the scene", and a Kurdish intelligence source said he was believed to be in the region of Baaj, about 130 km (80 miles) west of Mosul.

Mosul is still home to nearly 1.5 million people, who risk being caught up in brutal urban warfare. The United Nations has warned of a potential humanitarian crisis and a refugee exodus. Iraqi officials say Islamic State is holding the civilian population as human shields.

U.N. human rights spokeswoman Ravina Shamdasani said on Friday Islamic State fighters had killed hundreds of people, including 50 deserters and 180 former Iraqi government employees, around Mosul.

They have also transported 1,600 people from the town of Hammam al-Alil, south of Mosul, to Tal Afar to the west, possibly for use as human shields against air strikes, and told residents to hand over boys above the age of nine, in an apparent recruitment drive for child soldiers.

The number of people displaced since the start of the Mosul campaign jumped to 30,000 as 8,000 people fled the fighting in the last 24 hours, the United Nations refugee agency UNHCR said. Most of the new arrivals came from the Kokjali district, which the army recaptured this week and which officers say has come under fire from retreating Islamic State forces.

The figures do not include thousands of people from outlying villages forced to head to Mosul by retreating Islamic State fighters who used them as human shields.

ROCKET LAUNCHERS

Mosul residents, speaking to Reuters by telephone, said Islamic State fighters were deploying artillery and rocket launchers in and near residential areas.

Some were hidden in trees near the Wahda district in the south, while others were deployed on the rooftops of houses taken over by the militants in the Ghizlani district close to Mosul airport, they said.

People in southern and eastern neighborhoods said on Thursday night that their houses had been shaken by artillery and rocket barrages launched from their districts towards the advancing troops.

As well as the Islamic State resistance in Mosul itself, the militants have launched diversionary attacks across the country since the start of the offensive.

In the town of Shirqat, about 100 km (60 miles) south of Mosul, militants stormed a mosque and several houses early on Friday, a local police officer said, killing seven soldiers and fighters from the Shi'ite Popular Mobilisation force.

The insurgents crossed from the eastern bank of the Tigris into the town at 3 a.m., taking over al-Baaja mosque and fanning out into alleyways. Security forces imposed a curfew and said reinforcements from the Popular Mobilisation, or Hashid Shaabi, forces were being sent to the town.

In their drive towards Mosul, Iraqi troops and Kurdish peshmerga fighters have closed in from the north, from the eastern Nineveh plains and up the Tigris from the south.

The Hashid Shaabi forces of mainly Shi'ite militias joined the campaign on Saturday, fighting to cut off the western supply route to Islamic State areas in Syria. A Hashid spokesman said they had made progress, but cars have continued to leave Mosul, heading west.

A witness in western Mosul told Reuters by telephone that vehicles flowed in and out of the city on Friday. "I can see long convoys...some of them are heading outside the city through the Mosul-Rabiya road and others are coming into the city".

As well as families forced back into Mosul by Islamic State, residents say some Sunni Muslims in the western villages around the city may have chosen to move back into the city, fearing the advancing Shi'ite forces.

(Additional reporting by Stephen Kalin in Bartella, Saif Hameed in Baghdad, Tom Miles in Geneva and Isabel Coles; writing by Dominic Evans, editing by Angus MacSwan and Anna Willard)